Miles’ Letter: Q3 2018

We are reminded of what is reported to be an ancient Chinese curse: “May you live in interesting times” (first reported to the British Parliament in 1836 by diplomats returning from China). With the current administration seeming to be intent on threatening a trade war as a means of negotiating better foreign trade deals, to renewed pressure on foreign oil, the second half of the year looks “turbulent,” to put it mildly. Despite all the negative world news, consumer confidence remains high. The long-forecast economic slow down in the automotive sector refuses to raise its head, and most pundits are saying the second half should rival last year’s near-record numbers of cars built.

Optimism not Elation

In conversations with executives across many different business segments, we are still hearing cautious optimism about the next twelve months. However, this optimism does not mean the various C-suites have opened up their pocketbooks. No, we are hearing they are treating the back half of 2018 as being flat, which means they believe they are well positioned without making new capital investments or increasing head-counts. We will still wait to see the effects of the tariff wars.

The Passing of a Legend

The news of the untimely death of Sergio Marchionne, the vaunted CEO for FCA and Chairman of Ferrari has saddened the industry. He is acknowledged as the “fixer” who put the number three domestic automaker in the black. He also leaves fingerprints off-road in one of his spin-offs, CNH, which, like the rest of the off-road/agricultural/construction equipment makers, is doing well. Industry insiders were not surprised that his successor at the helm of FCA, Mike Manley, has taken over and, having been groomed for the role, will almost certainly follow Sergio’s plan for the company.

Solid Earning Numbers but a Volatile Street

Defense spending is still robust, and the aviation sector is also doing well so across the board in manufacturing, life is good for the present. Wall Street hates drama as we all know so, in spite of mostly positive earnings reports, the drama of Brexit, trade wars, and continued unrest in the middle-east and eastern Europe will continue to cause significant volatility. Unless there is a serious (>15%) correction, most of the population will not be panicked.

Wind Shift?

So, what does all of this say about the employment market? We believe that we are starting to see the turning-point between the candidate-driven market and the employer-driven market. More and more we are hearing hiring managers say they did their hiring earlier in the year and they think they are set for the second half. That does not mean opportunity for the talented candidate no longer exists, it just means the there may not be as much competition for them. Companies have started looking for bargains and strategic hires to fill in gaps. They are being more selective before laying down a lucrative offer.

Autonomy is Still King

The hot technologies related to autonomy and technology features (on road and off) are still snapping up talented engineers as quickly as they can find them. The race to get advanced driver assistance systems (ADAS) in place is still the hot-button. We don’t see that changing any time soon. What will be interesting is the dynamic between the California geeks and the Detroit ironmongers. Who will be the supplier and who will be the OEM. It’s leaning East right now but who knows.

As we said at the onset: “May you live in interesting times.” We might also remind you there is another interesting feature of the Chinese language. The Chinese word for chaos is the same as their word for opportunity!

Have a great quarter and second half.

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